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NATIONAL ECONOMIC REPORT of BERMUDA 2017

GOVERNMENT OF BERMUDA

Ministry of Finance

8775_ERCOVER_2018.indd 1 14/02/2018 12:08 PM

GOVERNMENT OF BERMUDAMinistry of Finance

NATIONAL ECONOMIC REPORT

OF BERMUDA

2017

Published by: Government of Bermuda

Ministry of Finance

Government Administration Building30 Parliament Street

Hamilton HM 12Bermuda

February 2018

Design: Department of CommunicationsPrinted by: The Bermuda Press Ltd

Contents

Page

THE ECONOMY IN 2017 1

GROSS DOMESTIC PRODUCT 2016 1

ECONOMIC TRENDS 2017 2

Domestic Demand 2

Personal Consumption and the Retail Sector 2

Capital Formation and the Construction Industry 3

External Demand 4

International Business 4

Tourism 5

Employment 6

Inflation in Bermuda 7

Balance of Payments 7

Financial Sector 8

GLOBAL ECONOMIC OUTLOOK 9

2018 OUTLOOK FOR BERMUDA 13

ACKNOWLEDGEMENTS 16

TABLES 17

NATIONAL ECONOMIC REPORT OF BERMUDA 2017 1

THE ECONOMY IN 2017

The Ministry of Finance estimates that Bermuda’s GDP may have increased by 0.75% – 1.25% per cent in 20171 following a marginal contraction of 0.1 per cent in 2016.

Many of the major economic indicators such as employment, employment income, air visitors, new construction projects and retail sales increased in 2017 indicating a strengthening in the Bermuda economy.

The number of jobs is estimated to have grown by 0.1 per cent and the official unemployment rate remained at 7.0 per cent.

In the tourism sector, air visitors increased by 10.3 per cent while cruise arrivals rose by 5.1 per cent. Employment in hotels grew by 1.3 per cent.

Employment income rose by 3.1 per cent over the first three quarters of 2017. The largest increase occurred in international business sector whose employment income rose by 4.2 per cent.

The gross turnover generated by retail stores increased by 2.9 per cent in 2017 while jobs in the sector rose by 0.7 per cent.

Over the first three quarters of 2017 the level of construction activity fell by 7.0 per cent with the value of work put in place decreasing $5.4 million. The value of new projects started increased from $87.0 million in 2016 to $537.5 in 2017. Jobs in this industry grew by 2.8 per cent year-over-year.

The Consumer Price Index (CPI) measured 1.9 per cent for 2017. This level of inflation is above the 1.5 per cent recorded in 2014 and 2015.

GROSS DOMESTIC PRODUCT 2016

The most recent published estimates by the Department of Statistics for GDP are for the year 2016.

In 2016 the Bermuda economy grew by 3.4 per cent in current market prices. This increase marks the fourth consecutive year that the economy has grown in nominal terms, after 4 years of decline. Nominal GDP was reported to be approximately $6.127 billion reflecting an increase of $204.3 million above the 2015 revised figure of roughly $5.9 billion. As a result, Bermuda’s GDP per capita rose from $95,943 in 2015 to $99,316 in 2016. When adjusted for inflation, the level of economic activity or real GDP declined by 0.1 per cent.

1 Official 2017 GDP estimates are not yet available.

This rate was better than the five year average (2012-2016) of negative 1.2 per cent. However, the result was marginally below the Ministry of Finance’s 2016 estimate (made in February 2017) of an increase in GDP of 0.0–1.0 per cent.

The positive movement in GDP of 3.4 per cent at current market prices was largely driven by a 5.8 per cent increase in the output of the business activities sector, growth of 11.9 per cent in the transport and communications sector and a 10.6 per cent uptick in the hotel and restaurant sector.

The contraction in the level of GDP in real terms of 0.1 per cent was mainly caused by reductions of $35.1 million in the output of the financial intermediation sector, a $28.6 million decline in the international business sector, and an $8.5 million fall in the public administration sector. These losses were offset by gains of $13.2 million in the construction & quarrying sector.

FIGURE 1

The industry analysis of GDP provides useful information concerning the output of the 15 sectors of the Bermuda economy. Table 1 of this report provides this information in constant dollars (Nominal GDP) while Table 2 presents it in current market prices (Real GDP)

In current market prices, international business contributed the greatest amount to the Bermuda economy in 2016. This sector provided $1.68 billion in total output or 27.3 per cent of total GDP which was a 1.0 per cent increase when compared to 2015. The growth in output in this sector benefitted from increases in the value added of businesses offering insurance activities such as actuarial services, insurance claims adjustment services and insurance and reinsurance management.

2 NATIONAL ECONOMIC REPORT OF BERMUDA 2017

2016 marked the fourth consecutive year that the value added by the international business sector increased following 4 years of contraction. The value added from this sector represents over a quarter of total GDP and is a continuation in the trend of previous years. Companies in the insurance and reinsurance industry are the biggest contributors to this sector. Contributions to this sector also emanate from the trading operations of security and commodity brokerage, shipping, consultancy and other forms of international business activity.

The real estate and rental sector was the second largest contributor to GDP. This sector accounted for $1.0 billion in output or 16.4 per cent of total GDP. The value added from this industry increased by 2.3 per cent, increasing for the third consecutive year. The growth in this sector can be attributed to the rise in the imputed rent for owner-occupied dwellings.

The next largest contributor to Bermuda’s economy is the financial intermediation sector. This sector accounted for $733.5 million in output which represents 12.0 per cent of total GDP. The 3.8 per cent year over year growth in this sector was mainly the result of higher net interest received by banks which offset decreases in reserves by insurance companies.

The business activities sector contributed $563.4 million to the output of the economy representing 9.2 per cent of GDP. Output in this sector grew by 5.8 per cent led by greater sales of architectural and engineering activities, building cleaning activities and management consultancy.

Output generated in the education, health and social services sector was recorded at $504.9 million in 2016, which represents 8.2 per cent of total output. This sector experienced growth in output of 2.8 per cent which was primarily driven by greater output in private health activities and government hospital activities.

The wholesale, retail trade and repair services sector represented 7.2 per cent of GDP in 2016 with an output level of $443.1 million which is a 6.3 per cent increase over 2015. This sector increased for the third consecutive year following five consecutive years of decline. This sector was bolstered by growth in the wholesale of fuel, food, beverages and tobacco, and the sales of motor vehicles and construction materials.

The construction and quarrying sector grew by 10.7 per cent and accounted for 3.4 per cent of GDP. The output of $211.0 million was driven by continued construction activity associated with the 35th America’s Cup and major Hotel projects that were underway.

Economic Trends 2017

Domestic Demand

Personal Consumption and the Retail Sector

Employment income supports personal consumption and is estimated to have increased by 3.1 per cent for the first three quarters of 2017 compared to the same period in 2016. For the 12 month period ending September 2017, total employment income was $3.35 billion, some $79.3 million or 2.4 per cent greater than the 12 month period ending September 2016.

The year-over-year level of employment income grew by 2.4 per cent during the first quarter and 4.0 per cent in the second quarter and 3.0 per cent in the third quarter of 2017. In 2016 the Labour Force Survey, which measures the unemployment rate, was not compiled by the Department of Statistics because the Department obtained the data through the 2016 Census. During years when a Census is done, the Department of Statistics will use the Census data for the unemployment rate because it is more accurate. Based on the 2016 Census the unemployment rate was 7.0 per cent.

The broadening economic recovery has led to increases in employment income which should translate into increased personal consumption.

The most recent estimates by the Department of Statistics for household personal consumption are for the year 2016. During that year, total household personal consumption was $3.22 billion, reflecting an increase of 2.9 per cent over 2015.

FIGURE 2

6


While personal consumption estimates are not available for 2017, the Retail Sales Index (RSI) for 2017 offers insight into the expenditure trends of consumers in Bermuda’s retail stores.

In 2017, total gross turnover stood at $1,175.8 million which represents a 2.9 per cent increase when compared to 2016. In the first three quarters of 2017 employment income rose by 3.1 per cent which appears to have had a positive effect on retail sales as consumers had more disposable income.

Four sectors in the RSI recorded sales growth in 2017 while three sectors experienced declines.

Building material stores experienced the highest growth in sales of all sectors. Six of the 12 months in 2017 recorded double digit sales growth with two of those months recording growth of over 20 per cent. The annual growth in sales of 8.8 per cent can be attributed to an increase in the availability and demand of inventory for construction supplies, related to various types of construction.

All other store types recorded the next largest increase in sales of all sectors. The sales level recorded in this sector was led by a strong second quarter which saw sales grow by an average of 9.5 per cent. The average monthly increase in this sector was 1.3 per cent. Sales increased due to greater demand from marine and supplier stores and increased gross receipts of pharmacies.

Monthly receipts by service stations advanced by an average of 1.3 per cent, due in large part to an increase in the cost of fuel in 2017. A 6.1 per cent increase in the second quarter was responsible in large part for the annual increase.

The largest sales decline was recorded by motor vehicle stores. The 3.8 per cent decline in sales for 2017 was mainly the result of fewer motor vehicles sold due in part to less vehicle availability throughout the year.

During 2017, overseas purchases declared by residents returning to Bermuda grew from $57.5 million to $58.4 million year-over-year, representing a 1.6 per cent increase.

The declared value of overseas purchases during 2017 equated to 4.8 per cent of the combined estimated local and overseas gross turnover in the retail sector.

Residents traveling overseas during the first three quarters of 2017 declared that 51.5 per cent of their overseas expenditure was on clothing and footwear and 7.6 per cent was spent on electronic and photographic equipment. The

value of goods declared by returning residents does not include the significant amount of shopping performed by residents through mail order and online purchases over the internet.

FIGURE 3

Capital Formation and the Construction Industry

Some leading building indicators displayed negative results in 2017; however with major projects in the pipeline, these results should start to improve. Evidence of the negative growth comes from the Department of Planning where new planning applications declined marginally to 465 in 2017 from 472 in 2016. Building permits are an indication of the projects that are actually being built and they also declined from 822 in 2016 to 794 in 2017.

During the first three quarters of 2017, the value of new projects started rose from $87.0 million in 2016 to $537.5 million, an increase of 517.8 per cent. However the estimated value of work put in place during the same time period fell from $77.3 million in 2016 to $71.9 in 2017, a decrease of 7.0 per cent. These declines are mainly attributed to work being done in the lead up to the America’s Cup in 2016.

Work performed on residential construction projects accounted for 16.7 per cent of total construction activity. Offices, shops and warehouses contributed 24.6 per cent, and construction on roads, bridges and airports represented 32.5 per cent of total activity in the construction industry. Together, these three categories accounted for 73.9 per cent of all work put in place between January and September 2017. 58.0 per cent of the construction work performed during that time period was performed by the private sector and 42.0 per cent by the public sector.


FIGURE 4

During the first nine months of 2017, 50 new dwelling units were completed in the residential sector of the construction industry, which represented an increase of 9 units or 22.0 per cent year-over-year and halts the downward trend that occurred in this segment of the construction industry over the past several years. Residential dwelling units are made up of four categories: studio apartments, one bedroom, two bedrooms and three bedrooms and over. Comparing the first nine months of 2017 versus 2016, the number of new studio apartments grew by 4 units to a total of 12 (50.0 per cent), one bedroom apartments fell by 2 units to register a total of 18 (10.0 per cent), two bedrooms grew from 10 to 11 units (10.0 per cent) and three bedrooms and over experienced the largest increase of 6 units to end the third quarter with 9 (200.0 per cent).

External Demand

International business and tourism are Bermuda’s primary sources of foreign exchange earnings. The Department of Statistics estimates that in the first three quarters of 2017 these two sectors of the economy represented 68.7 per cent of the total balance of payments current account receipts providing $1,888.2 million (excluding financial services) in foreign currency receipts. This combined figure grew by $110.7 million or 6.2 per cent when compared to 2016. Individually, the amount of foreign exchange earnings produced by the international business sector grew by 3.7 per cent year-over-year with a cumulative three quarter total of $1,509.6 million for 2017. The amount of foreign exchange earnings generated by tourism activity increased by 17.5 per cent recording earnings of $378.6 million at the end of September 2017.

International Business

In 2017 the international business sector provided 3,838 jobs in the economy reflecting a growth of 0.2 per cent year-over-year, or an increase of 6 posts. Over the first nine months of 2017, foreign exchange earnings of the international companies increased by $54.4 million to $1.509.6 billion representing growth of 3.7 per cent.

This sector creates benefits to the Bermudian economy by way of jobs for Bermudians and revenue for local businesses. It also provides business visitors that support the tourist industry and provides government with revenue from taxes and fees.

Over the first three quarters of 2017, the BMA registered 33 new insurers. Of those three quarters, the third quarter was marked by one of the most active hurricane seasons in more than a decade. Two major events, hurricane Harvey and hurricane Irma made a landfall to the U.S. while hurricane Maria devastated several Caribbean nations including Puerto Rico. As a result the third quarter of 2017 recorded higher losses for large commercial Bermuda (re)insurance groups compared to Q3 2016, while the combined ratio surged by 67.4 per cent q/q standing on average at 149.3 per cent. The pricing dynamics in the market are set to change after these events, according to market participants, following a prolonged soft market. Nevertheless at the moment this development seems to be a profits and not a capital event.

Bermuda (re)insurance groups improved their asset base by 10.8 per cent q/q. Bermuda (re)insurers produced a negative gross profit of $3.6 billion due to substantially higher losses due to the two major hurricanes mentioned above. The aggregate combined ratio stood at 149.3 per cent compared to 89.2 per cent in Q3 2016. The loss ratio jumped by 113.0 per cent q/q due to catastrophic losses while the expense ratio declined by 11.3 per cent.

Reserve leverage increased by 24.4 per cent q/q and financial leverage increased by 18.2 per cent q/q. Total equity dropped by 6.2 per cent per cent q/q while reserves increased by 16.7 per cent, thus increasing the reserve leverage. The faster increase of assets compared to the drop in equity increased the financial leverage. Net Written Premiums to Equity, which is a very rough inverse measure of solvency, increased by 10.6 per cent q/q reaching 64.0 per cent.

The investment portfolios of Bermuda (re)insurance groups produced a low Return on Investment (RoI) close to 0.6 per cent, a drop of 7.3 per cent q/q. Return on Equity (RoE) turned


negative due to negative net income. As a proxy for liquidity, the sum of cash and high quality “AAA”-rated securities represents 152.4 per cent of claims for Q3 2017, a decrease of 28.4 per cent q/q.

Tourism

The Bermuda tourism industry enjoyed a remarkable two years of expansion recording monthly year-over-year growth for 23 of the past 24 months in leisure air arrivals. The anomaly is September 2017 which can be attributed to an exceptionally active Atlantic Hurricane Season.

More importantly, the island’s tourism industry experienced eight consecutive quarters of year-over-year growth in leisure air visitor spending. Cruise visitor spending saw modest gains. However, a steadily improving air visitor spending number is more important to the industry’s development because air visitors spend, on average, at least ten times more than cruise passengers when they visit Bermuda.

The total estimated amount directly injected into the island’s economy by visitors in 2017 is $431 million, which represents a sizeable 20.3 per cent increase over the previous year. Meantime, the total amount of visitors in 2017 reached 692,947 (including yachts), the highest number in recorded history.

The total number of vacation air arrivals for 2017 is 182,439, up from 164,321 in 2016. The 11.0 per cent increase is critically important to the industry’s growth because, on average, air visitors spend at least ten times more than cruise passengers when they visit Bermuda. The greater volume of air vacation arrivals fuelled an increase in visitor spending. In 2017, leisure travelers who arrived by air spent an estimated $272.1 million on island, up from $222.1 million in 2016, a 22.5 per cent jump. Additionally average per person air leisure visitor spending jumped 10.4 per cent from $1,351 to $1,492. This data bodes well for the tourism industry contributing to two solid years of growth in air visitor arrivals and spending after a decades-long trend of contraction.

The total number of visitor air arrivals, with friends and family and business travel factored in, grew from 244,491 in 2016 to 269,576 in 2017, a 10.3 per cent increase. Cruise passenger arrivals also increased last year by 5.1 per cent, rising from 397,904 to 418,049. Total visitor arrivals (air and cruise) in 2017 increased by 45,230 or 7.0 per cent year-over-year.

All four quarters of 2017 experienced growth in air arrivals while cruise arrivals grew in the first three quarters before declining in the fourth quarter. These positive results led to a total number of visitors of 687,625 compared to 642,395 in 2016.

74 per cent of total air visitors originate from the US, 10 per cent from Canada, 9 per cent from the UK, 3 per cent from Europe and 4 per cent from the rest of the world. In 2017, air visitors from the US grew by 8.4 per cent which can be largely attributed to increased air lift from Boston. The greater capacity caused the number of visitors from Boston to expand by 13.4 per cent. Jet Blue switched from half years of seasonal flights from Boston to year round flights and it has had a positive effect on that market.

Air visitors from Canada increased by 15.5 per cent due to a better marketing strategy and a strong response to Bermuda’s new branding messaging. Air arrivals from the UK and Europe were up 5.8 and 29.1 per cent respectively. Both expansions are mainly the result of the 35th America’s Cup.

Hotel occupancy rates averaged 63.1 per cent in 2017, an increase of almost 9.2 per cent over the 2016 number. The increased hotel occupancy is a result of higher demand and higher visitation to the island as the number of properties remained the same. The occupancy rates recorded in 2017 amounted to the best performance in a decade.

The average daily rate improved year-over-year, up 9.4 per cent, helping to make revenue per available room much healthier, up 19.5 per cent. The 35th America’s Cup in 2017 played a critical role in driving demand and higher visitor spending for the hotel sector, not only in May and June when the America’s Cup took place but throughout much of the year.

The number of visitors under 45 years-old continues to power the comeback. Approximately 83 per cent of the growth in leisure air arrivals in 2017 is from visitors under the age of 45.

The number of visitors who chose vacation rentals when they travelled to Bermuda surged 133 per cent in 2017 versus 2016, according to Airbnb data shared with the Bermuda Tourism Authority. With all vacation rentals factored into the equation, 10 per cent of total visitors chose to stay in vacation rentals last year.

Additionally, and very importantly, Bermuda enjoys higher consumer awareness – perhaps the highest in a generation. That awareness has resulted in greater interest, evidenced


through, among other things, visits to the GoToBermuda.com website. Putting on the 35th America’s Cup, undoubtedly played a sizeable role in putting Bermuda top of mind. This was helpful not only because the island’s people successfully hosted the event, but because the event was leveraged to generate media buzz far beyond the world of sailing.

For example, Bermuda was on the “best list” of scores of mainstream and travel trade publications at the start of 2017. Additionally, Bermuda’s refreshed brand, which rolled out in 2016, resonated with the Bermuda Tourism Authority’s target audiences and that showed up in the 2017 performance – exhibited by the strong growth from younger visitors.

Employment

In the 2016 Population and Housing Census Preliminary Report, produced by the Department of Statistics, the 2016 unemployment rate was measured at 7.0 per cent. This report represents the last time that the unemployment rate was calculated.

Preliminary data from the 2017 Employment Survey indicates that the total number of jobs in Bermuda grew by 40 posts from 33,481 in 2016 to 33,521 in 2017, which equates to a 0.1 per cent increase. 2017 represents the second consecutive year that the number of jobs has increased since 2008 when the number of jobs amounted to 40,213. Although the increases have been marginal in both years, the 2016 job growth halted seven consecutive years of job reductions in a Bermuda economy that only recently began to experience positive growth. Overall the island has lost 6,692 jobs since 2008, a reduction of 16.6 per cent.

Growth in the number of jobs began to moderate in 2007 when the increase was 0.4 per cent. The number of jobs peaked in 2008 at 40,213 reflecting year-over-year growth of 0.9 per cent. Consistent with the decline in the economy, the number of jobs in Bermuda declined every year starting in 2009 and continuing until 2015. The declines ranged between 5.2 per cent and 0.9 per cent during those years. With sustained economic growth, the number of jobs is anticipated to continue to grow after the modest increases in 2016 and 2017.

Restaurants, cafes and bars was the only sector to gain over 100 jobs, increasing by 113 posts. The next largest increase occurred in financial intermediation followed closely by construction which contributed 55 and 54 additional positions respectively.

Restaurants, cafes and bars recorded the largest job growth of any industrial sector. This sector’s employment numbers grew from 2,023 in 2016 to 2,136 in 2017. These figures equated to an increase in employment of 5.6 per cent.

The Financial Intermediation sector experienced an increase in posts of 2.4 per cent, settling at 2,387 jobs in 2017 from 2,332 a year earlier.

Employment levels in the Construction sector stood at 2,008 in 2017, an expansion of 54 posts or 2.8 per cent. The sector with the next largest amount of job growth was Wholesale Trade & Motor Vehicles. This sector experienced an uptick of 52 jobs registering a total of 1,438 posts in 2017 or 3.8 per cent year-over-year.

Collectively, the three divisions of economic activity with the greatest growth in jobs accounted for 222 additional jobs in 2017.

These increases were offset in large part by the Other Community, Social & Personal Services sector which recorded the largest reduction in jobs in 2017. This sector’s employment numbers fell from 2,056 in 2016 to 1,898 in 2017. This figure equated to a reduction in employment of 7.7 per cent.

Other significant losses in posts occurred in the Education, Health & Social Work sector which lost 67 positions, or 1.8 per cent, falling from 3,722 in 2016 to 3,655 in 2017.

Five major occupational groups experienced job growth in 2017. Service workers, shop and market sales workers had the largest increase of 113 positions followed by senior officials and managers whose jobs grew by 85 positions. Other groups with positive growth were Technicians and associate professionals (+74), craft and related trade workers (+51) and Armed Forces (+1).

There were five major occupational groups that experienced job losses in 2017. The largest reductions occurred with clerks who shed 117 positions, professionals’ jobs fell by 80 posts, plant and machine operators and assemblers (-73), skilled agricultural and fishery workers (-10) and elementary occupations (-4).

Jobs occupied by Bermudians and Non-Bermudians were the only status categories to exhibit an increase in employment in 2017. Bermudian jobs increased by 84 positions from 23,494 in 2016 to 23,578 in 2017 which is a 0.4 per cent rise. Non-Bermudian employment grew from 7,259 in 2016 to 7,281 in 2017 which equates to 22 posts or 0.3 per cent. Permanent


Residence Certificate holders’ positions declined by a total of 34 posts or 4.1 per cent to finish 2017 with 792 positions. Non-Bermudian Spouses of Bermudians accounted for 32 job losses or 1.7 per cent to end the year with 1,870 posts.

Inflation in Bermuda

The Consumer Price Index (CPI) increased at an average annual rate of 1.9 per cent for 2017 which is in line with the Ministry of Finance’s February 2017 forecast which stated that, “….it is expected that the CPI will register in the range of 1.5-2.0 per cent.” The headline rate in December stood at 1.9 per cent year-over-year.

The average rate of 1.9 per cent, although minimal, is above Canada which had an average inflation rate of 1.6 per cent. Bermuda’s rate however, is below the UK (3.6 per cent) and the U.S. (2.1 per cent). The level of inflation had declined between 2011 and 2013 before marginally increasing in 2014. Over the last three years, the rate fell to 1.5 per cent in 2015 and 2016 before increasing again last year. The average rates for the years prior to 2015 were 2.7 per cent in 2011, 2.5 per cent in 2012, 1.8 per cent in 2013 and 2.0 per cent in 2014. Such moderate inflation is beneficial for the economy as it encourages consumers to purchase goods and services and also supports productive planning and investment. Since 2008, when the yearly rate of inflation was recorded at 4.8 per cent, the level of inflation has averaged 2.0 per cent. Given this trend in the level of inflation, The CPI is expected to end 2018 in the region of 1.7-2.2 per cent.

In 2017, the largest price increases were recorded in the transport & foreign travel, education, recreation, entertainment & reading, fuel & power and food sectors.

The increases in price levels of the transport & foreign travel sector was the most significant contributor to the level of inflation in 2017. The average rate of price increases for this sector was 3.5 per cent which can primarily be attributed to increased costs of airfares, due to the privatization contract at the LF Wade International Airport, higher fuel prices and greater costs for overseas hotel accommodations.

The education, recreation, entertainment & reading sector experienced cost increases at an average rate of 2.1 per cent in 2017. Costs in this sector rose in large part as a result of increases in the cost of tuition fees for local schools and overseas colleges which expanded by 2.4 and 2.5 percent respectively in September.

The prices in the fuel & power sector climbed at an average rate of 7.1 per cent, in 2017, which was the result of increases in the average cost of propane gas, the fuel adjustment clause charged by Belco for the use of electricity and the introduction of the regulatory recovery fee which was introduced in April.

During 2017 the monthly increases in the food sector ranged from 1.3 per cent to 2.9 per cent with the average rate of price growth for the year settling at 2.2 per cent. The 2.9 per cent price increase recorded in December was the largest increase with the next highest figure 2.8 per cent recorded in November. Eight of the twelve months recorded price increases of 2.0 per cent or higher.

FIGURE 5

Balance of Payments

The international business sector and its interaction with the local economy has a significant positive effect on the balance of payments. The balance of payments continues to record relatively large current account surpluses which are an important strength in the Bermuda economy. Bermuda’s total current account surplus over the first three quarters of 2017 was recorded at $672 million. This figure is 75.0 per cent greater than the $384 million recorded over the first three quarters of 2016.

A large proportion of the increase in the current account balance was reflected in the primary income account which grew by $375 million or 37.6 per cent. Within the primary income account, investment income contributed to the majority of the gains over the first three quarters of 2017, increasing by $303 million. Net figures illustrate that the growth was the result of lower reinvested earnings and a decline in dividends paid compared to 2016. Employee compensation, which is also part of the primary income

Bermuda’s Consumer Price Index 2017


account, accounted for a large portion of the remainder of the growth and increased by $48 million.

The services account balance also increased, surging by $60 million. Within the services sector, travel services grew by $47 million or 29.2 per cent over the first three quarters of 2017. The rise in the travel service’s balance was mainly the result of increases in both air and cruise visitor arrivals and higher per-person visitor expenditure. Business services increased by $16 million or 9.0 per cent between January and September. The positive results were due to a decline in payments for business services, specifically business and management consultancy services.

Based on the level of the current account balance after the first three quarters of 2017 and the anticipated balance of payments flows for the last quarter of the year, it is estimated that the full year’s balance of payments current account surplus will be approximately $90 million more than the $766 surplus posted in 2016 based on the average surplus over the last 5 quarters and the current transaction trends between Bermuda and our trading partners.

Financial Sector

The financial sector remains relatively stable when compared to the previous year, despite significant challenges in terms of growing the economy and stabilizing government finances. With the US economy leading global economic recovery, the outlook for the Bermuda economy should improve. The banking sector remains stable with locally-based institutions seeing a reduction in Non-Performing Loans (NPLs). All banking institutions continued to be above the new Basel III capital requirements, with the sectoral risk-asset ratio (RAR) gradually improving during 2017. Asset quality indicators remained sound with NPL’s holding steady throughout the first three quarters of 2017. All banks have maintained robust liquidity levels and have consistently exceeded the phased-in minimum requirements for liquidity as set out in the Liquidity Coverage Ratio (LCR). Commencing 1st January 2018 all banks will be required to meet the Net-Stable Funding Ratio (NSFR) per the newly-adopted Basel III requirements.

Capital adequacy levels improved with banks holding more regulatory capital. The banking sector’s capital position rose in the third quarter of 2017, with the Common Equity Tier 1 (CET 1) ratio rising from 19.8 per cent to 20.8 per cent and the Basel III Risk Asset Ratio (RAR) increasing from 21.4 per cent to 22.3 per cent. The quarterly increase was driven by movement in the sector’s net capital base, as CET 1 capital

increased by 6.1 per cent (or $104.2 million) to $1.8 billion relative to the marginal change in risk-weighted assets (RWAs). Banks were also required to hold additional buffers in the form of the Capital Conservation Buffer (CCB) of 1.25 per cent, further bolstering minimum capital requirements. The sector also improved its leverage position, as the supplementary leverage ratio increased from 7.7 per cent to 8.4 per cent during the quarter.

Liquidity conditions were stable during the third quarter of 2017. The liquidity position was slightly higher, as the ratio of total Loans to Total Deposits (LTD) rose for a second consecutive quarter from 46.2 per cent to 47.3 per cent in Q3. Banks continued to comply with the phased-in Liquidity Coverage Ratio (LCR) of 80 per cent for 2017 and other regulatory liquidity requirements.

Sector total assets fell for a third consecutive quarter during 2017, falling by 2.4 per cent in the third quarter and 4.6 per cent from a year earlier. The quarterly decline in total assets was largely due to the decrease in interbank deposits (down 18 per cent or $524.5 million), while the remaining core assets were unchanged. Total customer deposits held by banks, were down by 2.2 per cent to $18.8 billion with most of the decline led by savings deposits (down 7.9 per cent or 525.1 million) and time deposits (down 4.1 per cent or 118.7 million); nullifying all of the positive growth in demand deposits (up 2.2 per cent or $213 million).

Banks posted higher profits during the third quarter, generating healthier returns. Net profits were up mainly due to reduced operating costs. Net interest income, consisting of 60.6 per cent of total income, was up 3.9 per cent over the prior quarter. Income sources from other banking activities increased by 74.5 per cent (or $25.8 million) contributing to the overall rise in total income (up 14.7 per cent or $29.7 million). Total operating expenses for the sector amounted to $71.2 million, down 47.8 per cent compared to the prior quarter. The combination of higher total income and lower reported operating expenses contributed to the rise in net profits. The improvement in profitability resulted in higher returns, with annualised Return on Assets (RoA) and annualised Return on Equity (RoE) increasing to 0.4 per cent and 4.4 per cent, respectively.

The investment book structure continued to be fairly conservative in the third quarter, with the sector holding more investments in highly-rated, non-equity, government guaranteed securitised instruments. Sovereign investments remained fairly stable during the quarter, making up a third of all investments held by the sector.


Bermuda money supply experienced minimal changes in the third quarter of 2017, yet remained above levels reported a year ago. The supply of local money fell slightly during the third quarter, as the combination from BD$ customer deposits (down 0.4 per cent or $13.9 million) to $3.6 billion and notes and coins in circulation (down 4.1 per cent or $5.7 million) to $133 million contributed to the quarterly decline in money supply.

Global Economic Outlook

All of the major fears about 2017 that dominated the latter stages of 2016 — a market crash as a result of a Trump presidency, a Brexit-triggered recession in the UK, and a collapse of the Eurozone following the implosion of the Italian banking system —failed to materialize. The world economy is actually estimated, by the IMF, to have grown by 3.7 per cent in 2017, which is a 0.5 percentage point higher than in 2016.

Surprisingly, the increase in growth was broad based, with positive surprises in Europe and Asia. As a result, global growth forecasts for 2018 and 2019 have now been revised upward by 0.2 percentage points to 3.9 per cent. The revision reflects an expectation that the increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes will add to the growth in the world economy.

Some of the events that helped to shape 2017 included the U.S. Federal Reserve continuing their rate rising cycle, the Bank of England raising interest rates for the first time in more than 10 years, and the surge of bitcoin.

Bitcoin has been around since 2009 but 2017 marked the year when it crossed the divide between being seen as an esoteric IT creation to becoming more of a known quantity. On January 1, bitcoin was trading at $908 per coin. At end of the year the price of a single bitcoin was in excess of $16,000 as investors from around the world speculatively pour money into the asset.

Bitcoin has caused a huge divide between more traditional financial institutions and regulators who mostly classify bitcoin as pointless and worthless — and those who believe that cryptocurrencies, and the blockchain technology that underlies them, are disruptive technology that will usher in a new way the global economy work going forward

In December 2017, bitcoin became even more mainstream when the Chicago Board Options Exchange, the largest

options exchange in the US, started offering bitcoin futures, thus allowing investors to bet on the future direction of the cryptocurrency.

On the negative side we have seen a year in which we had major natural disasters, geopolitical tensions, deep political divisions in many countries and the continuous struggle against terrorism.

In May of 2017, Emmanuel Macron comprehensively defeated far-right candidate Marine Le Pen to become France’s youngest president, since Napoleon. The youthful leader, who promised political renewal and campaigned on centrist reforms. French President Macron’s first steps in power, have seen him swiftly pass a bill to make the labor market more flexible, and he has also instituted public spending cuts and tax breaks for the wealthy; making France friendlier for business.

In contrast, German Chancellor Angela Merkel had mixed fortunes as she won her fourth term as chancellor in September elections. However, her victory was overshadowed by the emergence of a far-right party into parliament for the first time in more than 60 years. Chancellor Merkel’s center right party, the CDU, won approximately 33 per cent of the vote, sharply down from 41 per cent of the votes it collected in the previous elections of 2013. This put Mrs. Merkel in a weakened position as she had to negotiate a coalition government with rival parties – a task that was nowhere near complete at the end of 2017.

United States of America

The U.S. economy’s growth slowed in the fourth quarter of 2017 as consumer spending in three years resulted in a surge in imports.

Fourth quarter Gross Domestic Product (GDP) grew by 2.6 per cent when compared to the same period in 2016. This followed a 3.2 per cent growth pace in the third quarter of 2017. Overall, the U.S. economy grew by 2.3 per cent in 2017, much healthier than the 1.5 per cent recorded in 2016.

U.S. imports, which lower GDP growth, increased at their fastest rate in more than seven years during the fourth quarter of 2017. Increasing imports highlight the challenges that the Trump administration faces in its aim to lift annual GDP growth to 3 per cent.

Domestic demand soared at a 4.6 per cent rate, the highest jump since the third quarter of 2014, highlighting


the economy’s strength. Final sales to private domestic purchasers rose at a 2.2 per cent pace in the third quarter.

Strong domestic demand is in alignment with a global rebound that includes the Eurozone and Asia. Demand has also been propped up by President Donald Trump’s promise of major tax cuts, which came into fruition in December when the Republican-controlled U.S. Congress approved the largest overhaul of the tax code in 30 years.

The corporate income tax rate has been dropped to 21 per cent from 35 per cent and taxes for households have also been lowered. However, economists see only a modest boost to GDP growth going forward as the fiscal stimulus is coming at a time when the economy is almost at full employment.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at 3.8 per cent in the fourth quarter of 2017. That was the quickest pace since the fourth quarter of 2014 and followed on from a 2.2 per cent rate of growth in the third quarter.

Consumer spending is likely to remain supported by rising household wealth, thanks to not only the stock market rally but also due to higher house prices, tax cuts as we mentioned earlier and firming wage growth as companies compete for workers and some states raise the minimum wage.

Declining savings, in the U.S., however are a cause for concern. Savings fell in the fourth quarter of 2017 to $384.4 billion from $478.3 billion in the third quarter. The saving rate dropped to 2.6 per cent from 3.3 per cent in the prior period.

The surge in consumer spending was satisfied by imports, which grew at a 13.9 per cent pace in the fourth quarter, the fastest since the third quarter of 2010, offsetting a rise in exports, which is being driven by dollar weakness.

As a result, trade shaved off 1.13 percentage points from GDP growth in the fourth quarter, the most in a year, after adding 0.36 percentage points in the third quarter. Inventory investment also held back GDP growth in the fourth quarter, removing a 0.67 percentage points from output after adding 0.79 percentage points to output in the prior period.

In general the U.S. economy is healthy. Americans are shopping, businesses are investing, and the stock market is thriving. Consumer confidence is the highest since 2000, unemployment is the lowest in 17 years, and the country has added jobs every month for more than seven years.

The U.S. economy is poised for continued growth in 2018, with economists predicting the economy to grow by 2.7 per cent in 2018. However, a potential conflict with North Korea and the deep state war against the President Trump’s agenda are the two variables that can potentially weaken the prospects for growth.

United Kingdom

The United Kingdom (UK) economy grew slightly more than expected in the fourth quarter of 2017.

The preliminary estimate for fourth quarter GDP growth from the Office for National Statistics was 0.5 per cent, ahead of the expectation of 0.4 per cent growth.

On an annualized basis, the UK growth for 2017 is estimated at 1.8 per cent. Although this is down slightly from the 1.9 per cent recorded in 2016, it is ahead of the 1.5 per cent growth forecast by the Office for Budget Responsibility (OBR) in the November budget.

The chair of the OBR, Robert Chote, said in an interview that the UK economy is “weak and stable”, in a twist on Theresa May’s description of her Government as “strong and stable”.

And the Bank of England Governor, Mark Carney, speaking at the World Economic Forum in Davos, said the UK economy is now 1 per cent smaller than the Bank forecast before the 2016 Brexit vote.

Given the uncertainties facing the UK economy as Brexit talks intensify, the Bank of England looks set to keep interest rates steady in 2018. This will help households with cheap borrowing costs and also help to support the mortgage market.

Assuming talks with Brussels do not lead to any major falls in the British pound, the impact from the pound’s devaluation after the Brexit vote on inflation will gradually decline over the course of the year. The UK’s central bank, the Bank of England (BOE), has set a target of 2 per cent for the consumer price index, and rates are set to fall back gradually in this direction from a peak of 3.1 per cent in November.

Should there be a move higher, it will only be limited and gradual, according to the BOE’s governor, Mark Carney, and it should be manageable for most. Just a third of households have a mortgage on their home and the majority have a fixed rate mortgage, meaning they will not see any immediate change until the term of their mortgage comes to an end.


Those feeling the change will only see an increase in debt servicing costs of about £15 a month from a 25 basis point increase in rates, according to a BOE study.

One element to watch for as 2018 wears on is BOE Governor Carney’s approaching departure in June 2019. It is expected that investors and politicians will start an outcry for clarity on his replacement, which could lead to uncertainty over the direction of monetary policy.

In their forward projections, the OBR has forecast UK growth, in 2018, to slow to 1.4 per cent and a little further to 1.3 per cent in 2019, reflecting weaker household consumption due to higher inflation and weak investment from firms due to Brexit-related uncertainty.

Canada

Canada had a very impressive year of economic growth in 2017. Having weathered the oil price shock of the past two years, the Canadian economy registered strong growth of 3.1 per cent on an annual basis. What is even more impressive is that the expansion has been broad-based, with all sectors of the economy contributing. Goods exports were up 8.7 per cent year over year. Business investment, which is critical to continued growth, also improved. At the same time, Canada’s labor market thrived, adding 329,000 jobs in 2017, with nearly all in full-time employment.

It is believed that the reason Canada was able to post such remarkable growth over the past year was due, in part, to the fact that the economy had adjusted to the prior commodity shock and that it had significant spare capacity to accommodate the rapid growth. However, there have been signs that the excess capacity has contracted significantly over the past few quarters and that economic growth will slow to a more sustainable pace going forward.

The Canadian economy is expected to slow to approximately 2.2 per cent in 2018. However, this is still decent growth. From a provincial perspective, Alberta, British Columbia, Saskatchewan and Ontario will be the engines of growth, with above 2 per cent forecasted growth next year, while provinces in Atlantic Canada will show slower rates, at about one per cent and lower.

Canada’s economy can best be referred to as an open economy, as Canada’s economic performance has been and will continue to be harmonized with the rest of the global economy. Europe has been the driver of global trade growth. In fact, the contribution of European imports

to global trade growth equaled that of the U.S. and China combined. Europe’s economic growth is expected to reach 2.4 per cent in 2017 and 2.1 per cent in 2018, according to the International Monetary Fund. This is great news for Canadian exporters as they prepare to take advantage of the recently enacted Canada-European Union Comprehensive Economic Trade Agreement (CETA). CETA will open up a market of over 510 million people and that accounts for 22 per cent of global GDP. However, a couple of uncertainties confront Canada.

Firstly, the U.S. Federal Reserve will likely raise its key policy interest rate three times in 2018, up to 2.25 by year-end, while the Bank of Canada may raise its policy rate only twice over the next 18 months, up to 1.5 per cent. This interest rate differential will mean that the Canadian dollar will likely lose some ground to the U.S. dollar. A falling Canadian dollar though is good for exporters to the U.S., and for the tourism industry in Canada.

But higher interest rates in the U.S. mean than borrowing globally will become more expensive, and this will have an impact on Canadian businesses. The anticipated rate hikes by the Bank of Canada will also contribute to higher borrowing costs.

Secondly, there is concern with the North American Free Trade Agreement (NAFTA) renegotiation. With about two-thirds of Canada’s goods and services exports flowing to the U.S., this is the most important market for Canadian exporters. If the NAFTA renegotiation falls apart, Canadian exports will be effected negatively and because of the skewed relationship, in which Canada depends on trade with the U.S. more than the other way around, the Canadian dollar could significantly depreciate against the U.S. resulting in higher import costs.

China

China’s economy grew by 6.9 per cent in 2017 according to official data. This is the first time in seven years the pace of growth has picked up. The figure beats the country’s official annual expansion target of about 6.5 per cent.

However, many China observers believe the GDP numbers are much weaker than the official figures suggest as this month alone, the governments of Inner Mongolia and of the large industrial city of Tianjin have admitted their economic numbers for 2016 were overstated.

If we take the figures at face value, the 2017 growth rate is China’s highest in two years. And it represents the first time


the economy has expanded faster than the previous year since 2010. The numbers showed that in the fourth quarter of 2017, the economy grew at an annual rate of 6.8 per cent - slightly higher than analysts had been expecting.

It appears that China’s economy grew faster than expected in the fourth quarter due to a rebound in the industrial sector, a resilient property market and strong export growth.

Despite strong overall growth, there have been signs of weakening impetus in the economy as firms face higher borrowing costs and the government tries to restrain credit.

Growth of fixed asset investment, much of it government-directed, fell to the slowest pace since 1999 at 7.2 per cent in 2017. China‘s exports and imports growth also slowed in December after surging in the previous month, adding to signs of a receding economic momentum.

Also, China‘s bank lending halved in December as the government kept up its campaign to curb financial system risks, but banks still managed to hand out a record amount for the year amid the tighter scrutiny.

China’s economy begins 2018 facing what its leaders call three years of “critical battles.”

The battles are to tackle domestic debt, poverty and pollution as these pose greater risks to the Chinese economy even before higher interest rates and trade war threats from the U.S. are taken into consideration.

Although the nation is starting from a position of strength, with full-year growth in 2017 posing its first acceleration since 2010, the expansion is expected to slow in 2018.

As a result, the government is signaling that it is erring on the side of modest economic performance, if progress on the top risk - financial instability - can be overcome.

Japan

Strong global demand, especially for high-tech electronics along with the Bank of Japan’s ultra-accommodative monetary policy helped to stabilize economic activity in Japan.

Healthy international demand for Japanese goods sent the manufacturing Purchasing Manager’s Index to multi-year highs, and boosted capital expenditure. Robust economic activity is increasing job creation, with the unemployment rate hitting a 25-year low in November. Moreover, a tighter

job market is adding upward pressure on salaries, which is translating into stronger retail sales.

Confidence in the economy is surging among Japanese businesses from large to small. According to the Bank of Japan’s December Tankan Report (Short-Term Economic Survey of Enterprises), large businesses’ overall assessment of business conditions improved for the fifth straight quarter, hitting an 11 year high of +25. The confidence index among small and medium-sized businesses was recorded at +15, the highest level recorded since August 1991.

Real growth in Japan’s Gross Domestic Product (GDP) rose at an annualized rate of 2.5 per cent in the third quarter, registering seven straight quarter of economic expansion. It was Japan’s longest quarterly growth streak since the government began compiling comparable statistics in 1994. In the December consensus forecasts for real GDP growth (averaged from the predictions of 41 economists polled by the Japan Center for Economic Research) were 1.84 per cent for fiscal year 2017 (ending March 31, 2017) and 1.22 per cent for fiscal 2018. Meanwhile, the forecast for inflation was a 0.64 per cent increase in core consumer prices in fiscal 2017 and a 0.85 per cent increase in fiscal 2018.

The World Bank has forecast Japan’s economic growth at 1.3 per cent in 2018, decelerating from their estimated 1.7 per cent increase in 2017. It is believed the decrease will be a result of a withdrawal of fiscal stimulus and a moderation in export growth.

With all signs pointing toward modest but sustained expansion, the Japanese job market is steadily strengthening. The active opening-to-applicant ratio has continued to climb, reaching 1.55 in October 2017—the highest monthly figure since 1.64 was recorded in January 1974. The unemployment rate remained at a steady 2.8 per cent each month between June and October, but since August it has actually been lower. These trends bode well for wage increases in 2018. If the major unions can secure a 3 per cent increase in their 2018 spring wage negotiations, consumer spending is bound to rise in response.

Higher employment and better wages will offer other benefits as well. With good jobs comes stability, and with stability comes the confidence needed to support sustained economic expansion.

The national mood is looking up, judging from the results of the Japanese Cabinet Office’s annual Public Opinion


Survey on the Life of the People. In 2017, a full 73.9 per cent of respondents indicated that they were basically satisfied with their current standard of living, the highest percentage tallied in more than 50 years since the survey began asking the question.

One area where the Japanese government has managed to capitalize on is in the area of cryptocurrencies, such as Bitcoin. The Tokyo Government is hoping to capitalize on the growth in interest for cryptocurrencies as an opportunity to improve the Japanese economy.

Japan has become one of the most popular countries for Bitcoin and blockchain-related companies. One of the major reasons for this situation is the fact that the Japanese government has proper regulations and laws that favor cryptocurrencies. Earlier in 2017 the Japanese government officially recognized Bitcoin as a legal payment method. This caused a major price increase, as many Japanese investors decided to invest in the decentralized cryptocurrency.

The effects of Bitcoin were and continue to be multiple on the economy of Japan. Not only were further jobs being created, but the resulting wealth effect from the cryptocurrency’s rise in value has been spurring real and measurable economic growth. As more cryptocurrency exchanges and operations move to Japan, it’s likely that this financial trend will continue unceasingly.

It is estimated that cryptocurrencies may contribute 0.3 per cent to Japan’s GDP and 20 per cent of their total growth expected in 2018.

The year to come is sure to bring challenges for Japan in the form of major weather events, international tensions on the Korean Peninsula and elsewhere, and other potential threats to growth, but most indicators suggest that the Japanese economy now has the resilience to overcome such temporary setbacks. Looking ahead to 2018, it is not unrealistic to anticipate another year of modest but stable growth fueled by a balanced mix of internal and external demand.

2018 Outlook for Bermuda

The Bermuda economy in 2018 is projected to further improve, conditional on increased employment levels, higher capital investment in on-going projects, sustained growth in tourism and stable demand for financial services; as well as the government making positive strides to implement its strategy to diversify the economy. Domestic inflation is projected to

be slightly higher due to increased demand for goods and services and an expected recovery in global prices.

In 2018 the Government will continue to act prudently in order to support sustainable economic growth, but the primary focus is to invest in creating a more diversified economy, which will create stronger economic growth for the island. A stronger and more diversified economy will assist in the Government’s mission to increase employment across all sections of the Bermuda economy and create jobs and opportunities in not only existing industries, but also new sectors that will drive stronger economic growth in the future.

The PLP administration has recognized this fact and has made it a priority to cultivate a climate that would attract foreign direct investment that leads to a diversified economy.

Of particular focus has been the industry of Financial Technology (FinTech). FinTech is a relatively new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. The use of smartphones for mobile banking, investing services and cryptocurrency are popular examples of technologies aimed at making financial services more accessible to the general public. A large amount of FinTech runs on Blockchain technology (blockchain) and it is the firms that use blockchain that the government is interested in attracting to the Island.

An article published in Fortune magazine revealed that the number of blockchain and bitcoin (the most popular cryptocurrency) related job listings increased by 5753%. To help attract cryptocurrency related companies to our shores, the government is implementing sensible laws and regulations in order to protect consumers and the reputation of Bermuda.

Fostering an environment that adopts Blockchain Technology opens up a huge pool of business opportunities for Bermuda as well as creates more job opportunities in the sector, thus enabling Bermuda to diversify and keep the economy up-to-date with emerging technological advancements.

Bermuda’s major (re)insurers will report elevated combined ratios for 2017, averaging around 108%-109%, including more than 20 percentage points from catastrophe losses. This would exceed the 107.1% posted in 2011, the last year with significant insured losses from catastrophes, and compares with 91.8% in 2016, when catastrophe losses contributed only 5.3 percentage points.


The large catastrophe losses of 2017 appear to have ended several years of soft pricing, with market data in 2018 showing rate increases in most lines, particularly property and catastrophe business. But the increases look modest and it is questionable whether there will be a longer-term shift to a harder market, given the still-strong capitalization in the global (re)insurance market and extra capacity from the insurance-linked securities (ILS) market. The ILS market grew to a record size in 2017 (USD82 billion at end-September, according to Aon Benfield), with growth in both catastrophe bonds and collateralized reinsurance.

This year’s cut in the U.S. corporate tax rate to 21% from 35% and the new base erosion and anti-abuse tax (BEAT) will significantly reduce the long-standing tax advantage of Bermudian (re)insurers over those in the U.S. It is expected that the overall benefit of a Bermuda domicile and operations is to be reduced, but not eliminated, with the island largely maintaining its established position in the global market due to its underwriting expertise, strong and efficient regulatory regime and full Solvency II equivalence.

AIG’s announcement in early 2018 that it will purchase Validus will further reduce the number of independently owned and publicly traded Bermuda (re)insurers. But companies continue to be launched in Bermuda, demonstrating that the island remains attractive for start-ups. Bermuda market M&A could be driven this year by attempts to offset the impact of U.S. tax reforms and a continued competitive market.

The Bermuda Business Development Agency’s (BDA) will continue to encourage direct investment that positively impacts Bermuda’s economy and stimulates job retention and growth in the international business and professional services sectors.

In 2018, the BDA will support existing companies by deploying business development resources to encourage the continuation of existing streams of business for Bermuda companies and source new ones.

To effect growth and counter-balance attrition, the BDA will seek to attract new companies to set up and invest in Bermuda. While the emphasis will be on attracting companies that will have a physical presence, all company incorporations provide work and revenue for Bermuda service providers and the public purse. Companies without a physical presence contribute to the economy by providing fees to several Government departments and private firms.

In collaboration with the Ministry of Economic Development & Tourism’s Business Development Unit (BDU), the BDA will continue to provide a concierge service in 2018 which will assist companies to establish a presence on island. The agency acts as a conduit for advice, introductions and referrals to private sector partners, government officials and regulators.

Jurisdictional advocacy has been and will continue to be a top priority for the BDA due to the real risks and opportunities which contradicting external events can have on potential investment and domicile decisions. Counteracting negative press and actively cultivating media engagement to correct misperceptions about Bermuda or promote positive storylines will continue in 2018.

Specifically, the BDA is pursuing strategic business development initiatives in the following key sectors:

• �Asset Management: The BDA will continue to encourage the servicing of funds, primarily out of the US and put greater emphasis on promoting Bermuda as a domicile for private equity, while seeking to leverage ILS success.

• �Trust & Private Client: The BDA will develop products designed to encourage direct investment specifically from the High Net Worth markets in Asia and Latin America. 2018 will see the development and implementation of the packaging and distribution strategy for those products.

• �Risk Solutions: The BDA will continue to promote Bermuda as the world’s leading captive domicile with expanded marketing to regional US centres such as Florida and Texas. The momentum created in the healthcare space continues and expands to incorporate BDA’s cyber working group. BDA will liaise closely with BILTIR to launch their Long Term/Life Insurance working group.

• �Economic Diversification: The BDA will seek to increase the registrations from existing users of the ship registry and seek avenues to commercialize Bermuda’s existing satellite slots. They will also encourage Bermuda based companies with US affiliates to make use of the Nearshore concept and continue to find avenues to socialize the Nearshore proposition to appropriate decision makers in the US.

The outlook for international tourism looks extremely


positive in 2018 as a sustainable recovery is underway in the Bermuda tourism industry after decades of decline.

In 2018 the Bermuda Tourism Authority will continue its efforts toward harnessing the momentum clearly underway in the island’s resurgent tourism economy. Last year was the highest volume of total visitors in recorded history for Bermuda with 692,947 arrivals across air, cruise and yacht segments. With that level of visitation, it’s not surprising that all key performance indicators finished higher year-over-year. As Bermuda heads into 2018, the health of its tourism industry is significantly improved, particularly when compared to the situation just two years ago.

For 2018, the Bermuda Tourism Authority’s goal is to ensure many of these growth-enabling trends are maintained without the advantage of an America’s Cup event to impact in-year demand. The legacy impact is real, although we have work to do to convert higher interest into actual visitors. Furthermore, thanks to a more robust visitor events calendar, a greater selection of high quality experiences on-island and improved airlift, it’s expected the elevated numbers of younger air visitors, increased spending and higher arrival volumes achieved in 2017 can be matched in 2018. This will not be an easy feat, however.

One of the challenges to matching last year’s performance will be the availability of hotel inventory in the first quarter of 2018. Six local properties have a large portion – or indeed its full hotel inventory – off line for renovations. It represents about 12 percent of the country’s total hotel capacity in the first quarter. This is a blessing and a curse. The good news is that the property upgrades are exactly what the industry needs; our product will undoubtedly be more attractive to travellers post-refurbishment (GenCom for example is investing $25 million in its property at Rosewood Bermuda). The bad news is that the reduction in inventory makes it more difficult to keep pace with 2017.

Overall, growing hotel inventory has been a struggle for Bermuda over the past few decades and the Bermuda Tourism Authority expects to see tangible evidence of a turnaround in this area in 2018. By New Year’s Day in 2018, Azura, Caroline Bay and the St. George’s Resort all had shovels in the ground, and in some cases, structures taking shape. When their work is completed Bermuda will have 240 more hotel rooms to join up with a growing vacation rental inventory which surged more than 90 percent in 2017.

Above all else, the track record over the past three years for

the Bermuda tourism industry is the greatest reason for an optimistic 2018 outlook. The progress has been tremendous. Bermuda’s tourism industry has been on a path for growth since 2015 after decades of decline; the America’s Cup helped to accelerate the growth trajectory. In 2018, if Bermuda is able to keep pace with the landmark year in 2017, we will maintain the industry’s glide path to resurgence.

With major projects like the redevelopment of the airport and the above mentioned hotel developments already underway, many jobs have been and will continue to be created in the construction sector.

Along with private sector capital projects, the capital expenditure component of the 2018/19 budget will help to strengthen economic growth by providing vital support to our construction sector.

The new Government’s desire is to create new economic pillars and enact policies to grow Bermuda’s economy. This should lead to higher employment numbers providing sustained economic growth in most sectors.

Considering all the above factors, the Islands’ economic growth in 2018 is projected to expand by 1.5 – 2.0 per cent.


Acknowledgements

The Ministry of Finance gratefully acknowledges the assistance of the following entities in providing relevant data and text used in this edition of the National Economic Report of Bermuda:

The Bermuda Monetary Authority

The Bermuda Department of Statistics

The Bermuda Tourism Authority

The Bermuda Business Development Agency


Page

TABLE 1 Gross Domestic Product by Industrial Origin (At constant market prices $000’s) 2006 = 100 18

TABLE 2 Gross Domestic Product By Industrial Origin (At current market prices $000’s) 19

TABLE 3 Number of Filled Jobs by Economic Activity Group 20

TABLE 4 Retail Sales Index 21

TABLE 5 Consumer Price Index 22

TABLE 6 Major Construction Projects Estimated value of work put in place during period $ millions 23

TABLE 7 Gross Additions to the Stock of Residential Dwelling Units 24

TABLE 8 Visitor Arrivals 25

TABLE 9 The Bermuda Insurance Market $ billions 26

TABLE 10 Balance of Payments Estimates $ millions 27

Tables


TABLE 1

INDUSTRIAL SECTIONS 2011 2012 2013 2014 2015 2016

Source: Department of Statistics

GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN (At constant market prices $000’s) 2006 = 100

01 Agriculture, forestry and fishing 45,963 42,638 43,119 39,890 43,210 45,833

03 Manufacturing 74,981 63,792 58,607 54,995 54,674 53,239

04 Electricity, gas and water supply 98,320 91,028 88,594 86,274 84,006 71,160

05/02 Construction & Quarrying 176,214 151,849 148,899 149,870 159,061 172,242

06 Wholesale and retail, repair serv. 310,110 298,777 294,380 293,446 297,272 303,019

07 Hotels and restaurants 243,338 240,294 223,370 203,865 191,536 199,269

08 Transport and communications 245,885 234,951 242,926 248,035 246,244 241,925

09 Financial intermediation 707,740 663,508 670,451 653,371 664,657 629,542

10 Real estate and renting activities 833,638 817,937 806,086 800,599 804,348 810,450

11 Business activities 448,162 420,807 395,143 394,776 402,721 411,732

12 Public administration 268,521 273,191 270,158 252,743 253,470 245,006

13 Education, health and social work 352,014 353,942 338,532 313,795 323,540 329,430

14 Comm., social and personal serv. 97,468 95,135 88,582 83,600 89,579 98,728

15 International business activity 1,268,872 1,195,383 1,195,273 1,241,367 1,248,546 1,219,951

Total 5,171,226 4,943,231 4,864,120 4,816,625 4,862,863 4,831,525

Less: Imputed bank service charge 470,146 431,021 442,201 405,333 425,535 398,597

Add: Taxes and duties on imports 216,367 206,828 203,518 201,531 203,465 202,152

GDP at market prices 4,917,447 4,719,038 4,625,437 4,612,822 4,640,793 4,635,082

Per cent change from previous year -4.4 -4.0 -2.0 -0.3 0.6 -0.1


GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN (At current market prices $000’s)

TABLE 2

INDUSTRIAL SECTIONS 2011 2012 2013 2014 2015 2016

01 Agriculture, forestry and fishing 43,782 41,023 41,539 36,732 41,877 52,260

03 Manufacturing 65,214 52,102 49,078 44,388 49,114 46,471

04 Electricity, gas and water supply 97,644 86,598 83,677 86,728 92,724 97,565

05/02 Construction & Quarrying 203,776 177,278 177,697 178,685 190,606 210,982

06 Wholesale and retail, repair serv. 381,961 373,340 372,056 376,099 416,937 443,056

07 Hotels and restaurants 263,838 246,945 261,906 262,205 263,011 290,853

08 Transport and communications 265,765 268,693 269,419 259,267 245,393 274,549

09 Financial intermediation 719,640 729,916 714,128 721,737 706,320 733,472

10 Real estate and renting activities 960,311 954,379 948,247 962,994 979,741 1,002,070

11 Business activities 535,089 507,559 480,446 525,030 532,405 563,383

12 Public administration 331,318 340,427 341,204 323,355 327,379 319,747

13 Education, health and social work 468,298 485,254 489,715 463,929 491,013 504,939

14 Comm., social and personal serv. 122,650 120,750 112,499 111,203 126,427 144,233

15 International business activity 1,432,012 1,455,409 1,570,036 1,575,025 1,659,278 1,675,644

Total 5,891,299 5,839,672 5,911,648 5,927,377 6,122,226 6,359,223

Less: Imputed bank service charge 450,856 423,955 416,506 398,855 393,205 441,366

Add: Import duties 179,936 169,693 174,951 171,470 194,015 209,484

GDP at market prices 5,620,380 5,585,410 5,670,093 5,699,992 5,923,036 6,127,341

Per cent change from previous year -4.0 -0.6 1.5 0.5 3.9 3.4



TABLE 3

NUMBER OF FILLED JOBS BY ECONOMIC ACTIVITY GROUP

2013 2014 2015 2016F 2017P

Agriculture, forestry and fishing 589 581 602 592 597

Manufacturing 624 585 573 575 564

Electricity, gas and water supply 341 325 321 322 324

Construction & Quarrying 2,143 1,925 1,928 1,954 2,008

Wholesale and retail, repair serv. 4,113 4,093 3,977 4,143 4,214

Hotels and restaurants 4,217 4,120 4,012 4,127 4,268

Transport and communications 2,139 2,046 2,037 2,009 1,962

Financial intermediation 2,559 2,253 2,369 2,332 2,387

Real estate and renting activities 432 452 460 448 472

Business activities 3,523 3,425 3,565 3,602 3,621

Public administration 4,237 4,163 3,936 3,767 3,713

Education, health & social work 3,600 3,642 3,688 3,722 3,655

Other comm., social and personal 1,992 1,928 1,951 2,056 1,898

International business activity 3,768 3,937 3,900 3,832 3,838

Total 34,277 33,475 33,319 33,481 33,521

P = Preliminary data

F = Final


RETAIL SALES INDEXAverage Monthly Sales (1)

2006 = 100


TABLE 4

PeriodTotal

Retail StoresFood

Stores (2)Liquor

Stores (3)

Motor VehicleStores

ServiceStations

BuildingMaterial Stores

Apparel Stores

All Other Store Types

2012 95.3 0.6 92.9 6.4 90.8 8.9 68.5 (7.6) 105.4 (1.2) 130.4 (9.0) 98.0 (4.5) 97.6 (2.0)

2013 95.2 (0.1) 95.5 2.7 94.5 4.1 69.2 0.9 103.4 (1.9) 109.8 (15.8) 97.7 (0.3) 96.4 (1.2)

2014 96.1 1.0 96.4 0.9 100.5 6.3 83.3 20.4 102.7 (0.7) 93.3 (15.1) 96.6 (1.2) 96.5 0.1

2015 100.0 4.0 100.0 3.8 100.0 (0.5) 100.0 20.1 100.0 (2.6) 100.0 7.2 100.0 3.6 100.0 3.6

2016 101.9 1.9 102.4 2.4 103.6 3.6 102.5 2.5 102.8 2.8 106.6 6.6 97.1 (2.9) 101.3 1.3

2017 105.0 3.0 104.9 2.5 106.9 3.3 99.2 (3.2) 112.1 9.1 115.6 8.5 101.0 3.9 103.2 1.8

2016

Jan 91.3 4.4 99.4 3.5 74.3 (1.2) 110.4 26.0 86.4 4.8 91.3 (10.9) 62.0 (3.2) 86.7 4.7

Feb 88.1 6.8 93.2 5.7 79.4 4.4 111.5 23.1 85.2 10.5 92.8 (6.1) 57.5 1.3 84.5 5.1

Mar 98.2 4.5 103.5 5.7 93.0 7.0 104.7 6.2 92.7 0.7 116.0 11.3 78.6 (4.5) 94.6 5.0

Apr 99.4 2.9 100.6 4.8 97.2 7.0 116.3 (2.9) 97.0 5.3 118.8 25.1 83.4 (4.2) 95.4 (0.5)

May 104.2 (0.6) 103.5 (2.2) 111.0 (1.1) 100.2 12.7 113.4 9.1 116.2 3.6 99.2 (7.5) 101.5 (5.1)

Jun 110.2 1.9 104.0 2.9 116.6 9.1 111.0 4.9 114.6 0.1 107.1 (6.0) 122.2 (2.0) 113.1 2.6

Jul 111.4 (0.2) 108.8 0.8 141.1 8.6 92.7 (20.4) 131.3 0.8 113.7 15.0 99.7 5.9 113.3 (0.4)

Aug 100.8 2.9 100.6 1.1 103.4 (1.1) 91.6 4.6 109.2 (1.9) 97.9 15.9 93.0 2.0 103.5 6.8

Sep 101.3 4.8 101.7 2.9 102.5 6.0 113.3 24.2 102.2 4.1 105.6 14.0 91.6 (2.1) 98.8 2.4

Oct 98.1 (4.2) 105.0 0.9 106.5 2.6 86.8 (20.1) 104.0 (1.2) 101.5 (0.9) 76.8 (22.9) 94.3 (3.0)

Nov 103.5 5.1 100.2 4.3 93.1 1.6 109.1 16.3 98.5 4.1 122.6 20.7 114.7 (0.9) 102.9 3.4

Dec 116.6 (2.4) 107.5 (0.9) 124.6 (0.6) 82.8 (25.4) 98.7 0.6 95.0 1.8 186.7 1.7 127.4 (1.7)

2017

Jan 90.3 (1.0) 97.2 (2.3) 73.6 (1.0) 97.4 (11.8) 93.5 8.2 107.2 17.4 61.2 (1.4) 85.5 (1.4)

Feb 85.7 (2.7) 92.4 (0.9) 81.4 2.6 90.2 (19.1) 89.1 4.6 101.2 9.0 50.9 (11.6) 82.6 (2.3)

Mar 103.4 5.3 104.1 0.6 94.3 1.4 129.2 23.4 104.6 12.9 142.5 22.9 77.9 (0.9) 96.5 2.1

Apr 101.6 2.2 103.2 2.6 106.0 9.0 91.1 (21.6) 106.6 9.9 114.2 (3.9) 86.4 3.6 103.1 8.0

May 114.4 9.8 111.1 7.4 120.6 8.6 90.1 (10.1) 130.6 15.2 130.2 12.0 113.9 14.8 117.5 15.7

Jun 120.2 9.1 114.8 10.4 139.2 19.4 82.8 (25.4) 133.7 16.7 113.5 6.0 163.3 33.6 118.4 4.7

Jul 113.9 2.2 111.0 2.0 127.7 (9.5) 106.5 14.9 139.3 6.1 110.0 (3.3) 101.7 2.0 113.5 0.2

Aug 105.5 4.7 103.7 3.1 114.5 10.7 117.6 28.4 116.8 7.0 126.3 29.0 90.9 (2.3) 99.9 (3.5)

Sep 103.2 1.9 106.3 4.5 104.2 1.7 102.0 (10.0) 112.2 9.8 118.9 12.6 95.7 4.5 94.3 (4.6)

Oct 99.5 1.4 102.9 (2.0) 97.7 (8.3) 101.3 16.7 110.0 5.8 111.6 10.0 78.1 1.6 94.9 0.7

Nov 102.8 (0.7) 102.3 2.1 95.8 2.9 94.3 (13.6) 105.4 7.0 117.5 (4.2) 108.4 (5.5) 101.5 (1.4)

Dec 119.3 2.3 110.2 2.5 128.5 3.1 88.4 6.8 103.6 5.0 94.2 (0.8) 183.1 (1.9) 131.0 2.8

(1) Index numbers are subject to revisions(2) Includes household supplies, but excludes alcoholic beverages(3) Does not include sales to bars, clubs, hotels and restaurants



TABLE 5

CONSUMER PRICE INDEXAPRIL 2015 = 100

All Items Food RentClothing & Footwear

Tobacco & Liquor

Fuel & Power

Household Goods,

Services & Supplies

Transport & Foreign Travel

Education, Recreation, Entertain. &

Reading

Health &

Personal Care

2013

WEIGHT 1000 115 267 25 31 39 116 130 147 130

ANNUAL AVERAGE ( per cent)

2013 1.8 3 -0.3 0.1 4.4 -1.9 0.5 1.4 2.5 8.3

2014 2.0 3.1 0.8 2.0 2.4 -2.4 0.8 1.7 1.9 6.7

2015 1.5 2.7 0.6 1.3 1.2 -8.9 2.1 -1.3 0.9 7.8

2016 1.5 1.9 1.0 0.4 5.1 -3.3 1.6 -2.2 3.3 4.5

2017 1.9 2.2 0.1 1.5 7.8 7.8 0.5 3.6 2.0 1.3

MONTHLY ( per cent)

2015

Dec Nil -0.2 0.1 Nil 0.3 -2.0 Nil 0.4 0.1 Nil

2016

Jan -0.2 1.2 -0.1 0.1 0.4 -3.7 0.1 -1.6 Nil Nil

Feb -0.1 0.6 0.1 Nil 1.1 Nil Nil -1.4 -0.3 0.1

Mar -0.1 -0.1 Nil Nil Nil -0.8 0.1 -0.7 0.2 Nil

Apr 0.9 0.3 Nil -0.5 2 -2.6 Nil 0.8 2.7 3.2

May -0.1 -0.3 0.1 Nil 1.5 -5 Nil -0.3 0.5 Nil

Jun 0.5 0.2 Nil Nil 0.8 10.4 Nil 1 Nil -0.1

Jul 0.8 0.3 1 0.1 Nil 4.3 0.1 2.5 -0.2 Nil

Aug -0.5 0.1 0.1 Nil Nil Nil Nil -4.3 Nil Nil

Sept 1.0 0.1 Nil Nil 0.1 6.0 0.1 4.5 1.1 Nil

Oct Nil 0.1 Nil 0.3 Nil -0.9 0.1 Nil 0.1 0.1

Nov -0.5 -0.1 Nil 0.1 Nil -2.3 Nil -2.8 -0.2 Nil

Dec -0.1 -1.3 0.1 Nil -0.4 -3.1 Nil 1.3 0.1 Nil

2017

Jan 0.1 2.0 Nil 1.2 0.8 -2.3 Nil -1.2 Nil Nil

Feb -0.1 Nil -0.8 Nil -0.1 Nil Nil 0.8 -0.1 Nil

Mar 0.4 0.4 0.1 Nil 0.1 3.9 Nil 1.9 Nil Nil

Apr 0.3 -1.1 Nil Nil 2.8 0.5 0.1 1.9 0.2 0.2

May 0.4 1.7 Nil Nil 4.7 1.8 -0.1 Nil 0.1 Nil

Jun Nil 0.6 0.1 Nil Nil 3.3 0.2 -1.2 -0.1 Nil

Jul 0.6 0.2 Nil 0.2 0.7 3.0 0.2 2.4 0.1 Nil

Aug 0.1 0.1 0.1 Nil Nil Nil Nil Nil 0.2 0.5

Sept 0.2 -0.1 Nil Nil 0.1 0.2 0.1 0.2 0.8 Nil

Oct -0.1 0.1 0.1 0.1 0.2 Nil Nil -1.4 -0.2 0.5

Nov 0.1 0.1 Nil Nil 0.1 -2.1 Nil 1.2 0.5 Nil

Dec -0.2 -0.7 Nil Nil 0.1 Nil Nil -1.4 0.1 Nil

Dec ‘17 104 104.7 101.3 102.3 116.6 106 103.5 101.5 106.9 105.1

Dec ‘17

Dec ‘161.9 3.3 -0.4 1.5 9.8 8.1 0.5 3.1 1.7 1.3



TABLE 6M

AJO

R CON

STRUCTIO

N PRO

JECTS1

Estimated value of w

ork put in place during period $ millions

Type of Project

Sector

Value

Residential O

ffices, H

otels, Schools,

Roads, Industrial

Total Public

Private

Of N

ew

Shops,

Guest-

Hospitals,

Bridges,

Plant &

Projects

Warehouses

Houses

Comm

unity A

irports O

ther

Started

Centres

2013

85.1 30.0

23.7 9.0

57.5 16.9

10.7 147.8

78.3 69.5

2014

122.5 21.5

4.7 34.3

30.7 8.8

16.1 116.1

49.2 66.9

2015

161.8 27.9

13.6 13.0

4.3 3.6

15.4 77.9

25.8 52.1

2016

96.3 33.2

29.5 9.5

4.4 5.6

11.9 94.2

29.9 64.3

2013 Q

1 8.6

8.5 7.6

0.2 25.6

3.8 0.3

46.0 29.2

16.8

Q2

34.5 10.4

8.2 1.2

13.0 2.8

2.9 38.5

18.1 20.4

Q

3 15.6

8.2 7.7

2.1 5.9

6.5 4.8

35.2 13.0

22.2

Q4

26.4 2.9

0.2 5.5

13.0 3.8

2.7 28.1

18.0 10.1

2014 Q

1 18.0

5.0 0.3

21.2 21.6

4.3 2.2

54.6 24.2

30.4

Q2

56.3 5.5

1.7 3.6

7.9 2.1

4.1 24.9

12.3 12.6

Q

3 16.5

5.5 1.3

3.5 1.0

1.6 5.5

18.4 7.5

10.9

Q4

31.7 5.5

1.4 6.0

0.2 0.8

4.3 18.2

5.2 13.0

2015 Q

1 43.2

5.1 2.6

6.6 0.3

0.9 7.6

23.2 10.0

13.2

Q2

51.2 6.6

4.5 2.3

0.4 0.9

2.1 16.7

4.4 12.3

Q

3 18.7

7.2 3.2

0.5 2.6

1.1 4.2

19.0 7.9

11.1

Q4

48.6 9.0

3.2 3.6

0.9 0.7

1.5 19.0

3.5 15.5

2016 Q

1 12.4

12.8 11.7

3.6 0.4

2.5 6.1

37.1 7.0

30.1

Q2

55.4 10.9

8.4 2.3

0.4 0.7

2.7 25.4

9.5 15.9

Q

3 19.2

5.3 2.4

2.9 2.0

1.3 0.9

14.8 5.3

9.5

Q4

9.3 4.2

6.9 0.8

1.6 1.1

2.2 16.8

8.1 8.7

2017 Q

1 11.2

2.2 7.1

3.0 2.1

5.9 3.0

23.4 12.6

10.8

Q2

515.4 7.7

5.9 5.5

0.3 8.6

0.3 28.3

10.5 17.8

Q

3 10.9

2.1 4.7

2.0 1.6

8.9 0.8

20.2 7.1

13.1

1Projects valued at $0.5 million or m

ore

Source: Departm

ent of Statistics


TABLE 7

GROSS ADDITIONS TO THE STOCK OF RESIDENTIAL DWELLING UNITS

Number of Units Studio One Two Three Total units apartments bedroom bedroom bedroom completed and over2013 18 43 38 19 1182014 14 21 31 22 882015 17 21 5 15 582016 10 27 15 5 57

2013 Q1 5 16 10 5 36 Q2 4 7 13 4 28 Q3 2 7 8 3 20 Q4 7 13 7 7 34

2014 Q1 3 7 3 1 14 Q2 7 5 20 14 46 Q3 2 5 1 1 9 Q4 2 4 7 6 19

2015 Q1 1 6 0 5 12 Q2 4 7 2 5 18 Q3 2 4 0 2 8 Q4 10 4 3 3 20

2016 Q1 1 10 1 1 13 Q2 4 6 5 2 17 Q3 3 4 4 0 11 Q4 2 7 5 2 16

2017 Q1 2 8 4 2 16 Q2 6 4 5 5 20 Q3 4 6 2 2 14 Source: Department of Statistics


TABLE 8

VISITOR ARRIVALS

Number of visitors Year-on-year % changes

Regular Cruise All Regular Cruise All Visitors1 Ship Visitors Visitors Ship Visitors Visitors2 Visitors2012 232,063 378,262 610,325 -1.7 -9.0 -6.42013 236,343 340,030 576,373 1.8 -10.1 -5.62014 224,380 355,880 580,260 -5.1 4.7 0.72015 219,814 377,398 597,212 -2.0 6.0 2.92016 244,491 397,904 642,395 11.2 5.4 7.62017 269,576 418,049 687,625 10.3 5.1 7.0

2012 Q1 31,619 2,719 34,338 2.6 302.8 9.0 Q2 75,186 161,351 236,537 -6.6 0.2 -2.1 Q3 80,852 179,124 259,976 1.2 -4.3 -2.7 Q4 44,406 35,068 79,474 -1.0 -47.5 -28.8

2013 Q1 31,300 1,484 32,784 -1.0 -45.4 -4.5 Q2 75,013 133,737 208,750 -0.2 -17.1 -11.7 Q3 82,819 157,373 240,192 2.4 -12.1 -7.6 Q4 47,211 47,436 94,647 6.3 35.4 19.2

2014 Q1 31,032 0 31,032 -0.9 -100.0 -5.3 Q2 73,262 146,916 220,178 -2.3 9.9 5.5 Q3 78,195 169,846 248,041 -5.6 7.9 3.3 Q4 41,891 39,118 81,009 -11.3 -17.5 -14.4 2015 Q1 28,968 319 29,287 -6.7 n.a. -5.6 Q2 71,972 146,479 218,451 -1.8 -0.3 -0.8 Q3 76,487 182,256 258,743 -2.2 7.3 4.3 Q4 42,387 48,344 90,731 1.2 23.6 12.0 2016 Q1 32,233 3,341 35,547 11.3 938.9 21.4 Q2 75,730 150,811 226,541 5.2 3.0 3.7 Q3 86,948 190,333 277,281 13.7 4.4 7.2 Q4 49,580 53,419 120,999 17.0 10.5 33.4 2017 Q1 36,752 9,282 46,034 14.0 177.8 29.5 Q2 87,351 165,560 252,911 15.3 9.8 11.6 Q3 90,321 200,455 290,776 3.9 5.3 4.9 Q4 55,152 42,752 97,904 11.2 -20.0 -19.1

1Including those passengers arriving by ship and departing by air.2Excluding passengers arriving by ship and departing by air.

Source: Bermuda Tourism Authority


TABLE 9

Gross Net Total Capital premiums premiums assets and written written surplus 1983 6.5 4.7 17.1 8.41984 7.6 5.4 22.2 9.91985 10.1 8.1 24.5 10.21986 12.4 10.4 30.9 12.51987 10.3 8.0 34.9 15.01988 11.1 8.4 38.7 14.41989 12.0 9.4 44.5 17.41990 13.0 10.1 48.0 18.21991 15.4 11.8 52.3 19.91992 15.1 11.3 58.8 21.91993 17.9 13.4 69.9 29.01994 18.8 14.9 76.1 29.81995 23.4 18.4 95.0 36.91996 25.1 19.8 99.9 42.51997 25.4 20.4 111.8 48.41998 26.6 21.2 116.4 51.21999 30.4 23.8 131.6 54.42000 38.1 32.0 146.0 59.22001 48.5 40.9 165.3 64.92002 63.3 52.3 204.0 75.62003 94.7 84.1 236.0 87.32004 95.3 82.9 290.5 106.72005 100.7 86.3 329.9 110.02006 115.8 100.4 440.4 157.82007 124.4 100.8 441.3 167.12008 123.6 107.9 473.0 156.82009 119.8 106.3 496.1 182.12010 107.7 94.2 524.7 185.22011 107.6 94.6 452.2 168.82012 120.5 98.1 505.5 193.02013 163.0 138.7 607.6 191.62014 151.8 116.2 583.3 214.52015 130.8 108.5 631.7 200.8

Source: Bermuda Monetary Authority’s Statutory Financial Returns For All International Insurers

THE BERMUDA INSURANCE MARKET$ billions


TABLE 10

BALANCE OF PAYMENTS ESTIMATES$ millions

2013 2014 2015 2016 2017*

Exports 25 23 21 19 14Imports 1,012 969 935 980 855

Merchandise Trade Balance -987 -947 -914 -961 -841

Services & Income – receipts 3,957 3,397 3,381 3,563 2,747Services & Income- payments 3,015 2,530 2,495 2,796 2,076

Current account balance 941 867 886 766 671 Financial Account Direct Investment 51 120 -84 95 -58 Portfolio Investment 2,169 -1,853 1596 406 -665 Financial Derivatives 164 192 137 208 111 Other Investments 989 -545 -897 561 50 Reserve Assets 11 -15 7 10 24

Net Acquisition of Financial Assets 3,383 -2,102 758 1,281 -538

Direct Investment 93 -3 -143 77 -171Portfolio Investment -1,845 90 151 807 96Financial Derivatives -7 11 0 -4 -7Other Investments 1,783 -1,239 28 -280 -1,054 Net Incurrence of Financial Liability 2,424 -3,076 -24 600 1,136

Total Net Financial Account -960 -974 -782 -681 -597 Total Net Capital Account 0 0 0 0 0

Total Net Lending (+)/ Net Borrowing (-) 960 974 782 681 597

Balancing Item 18 107 -103 -86 -74

Numbers may not add due to rounding

* Q1 – Q3 provisional estimate


Design and pre-press production: Department of Communications

Printed in Bermuda by The Bermuda Press Ltd. February 2018

8775_ERCOVER_2018.indd 2 14/02/2018 12:08 PM

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